EXERCISE 12-5 Contrasting Return on Investment (ROI) and Residual Income [LO2, LO31 Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama Selected data on the two divisions follow (in millions of yen, denoted by ¥): Division Osaka Yokohama Sales. ¥3,000,000 ¥9,000,000 Net operating income Average operating assets. ¥210,000 ¥1,000,000 ¥720,000 ¥4,000,000 Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover. Where necessary, carry computations to two decimal places. 2. Assume that the company evaluates performance using residual income and that the mini- mum required rate of return for any division is 15%. Compute the residual income for each division. 3. Is Yokohama's greater amount of residual income an indication that it is better managed? Explain.

EXERCISE 12-5 Contrasting Return on Investment (ROI) and Residual Income [LO2, LO31 Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama Selected data on the two divisions follow (in millions of yen, denoted by ¥): Division Osaka Yokohama Sales. ¥3,000,000 ¥9,000,000 Net operating income Average operating assets. ¥210,000 ¥1,000,000 ¥720,000 ¥4,000,000 Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover. Where necessary, carry computations to two decimal places. 2. Assume that the company evaluates performance using residual income and that the mini- mum required rate of return for any division is 15%. Compute the residual income for each division. 3. Is Yokohama's greater amount of residual income an indication that it is better managed? Explain.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Question 10.2 Provide the missing data for the following situations: Red Division White Division Green Division Sales A $10,000,000 E Net operating income $240,000 $500,000 $288,000 Total assets B C $1,600,000 Return on investment 0.16 0.10 F Return on sales 0.05 D 0.14
Q7 Consider the following data from two divisions of a company, P and Q: Divisional P Q Sales $ 1,500,000 $ 1,000,000 Operating Income $ 600,000 $ 450,000 Investment $ 4,000,000 $ 2,750,000 If both divisions were presented with an opportunity to invest in a project that is estimated to achieve an ROI of 15%, what will the units likely decide? Multiple Choice Division P will not invest; Division Q will invest. Division P will invest; Division Q will not invest. Neither unit will invest in the projects. Division P will be indifferent; Division Q will not invest. Division P will invest; Division Q will be indifferent.
Saved sp 2022 i Tan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Division Osaka Yokohama $ 9,200,000 $ 552,000 $ 2,300,000 $ 22,000,000 $ 1,760,000 $ 11,000,000 Sales Net operating income Average operating assets Required: 1. For each division, compute the return on investment (ROI). 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 13%. Compute the residual income for each division. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 13%. Compute the residual income for each division. Osaka Yokohama Residual income 2$ 184,000 $
Exercise 11-13 (Algo) Transfer Pricing Situations [LO11-3] Skip to question [The following information applies to the questions displayed below.] In each of the cases below, assume Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits. Case A B Division X: Capacity in units 100,000 95,000 Number of units being sold to outside customers 100,000 74,000 Selling price per unit to outside customers $ 55 $ 30 Variable costs per unit $ 26 $ 14 Fixed costs per unit (based on capacity) $ 7 $ 5 Division Y: Number of units needed for production 21,000 21,000 Purchase price per unit now being paid to an outside supplier $ 50 $ 28 Exercise 11-13 (Algo) Part 1 Required: 1. Refer to the data in case A above. Assume in this case that $3 per unit in variable selling costs can be avoided on…
Problem 10-17 Comparison of Performance Using Return on Investment (ROI) [LO10-1] Comparative data on three companies in the same service industry are given below: Required: 2. Fill in the missing information. (Round the "Turnover" and "ROI" answers to 2 decimal places.) Sales Net operating income Average operating assets Margin Turnover Return on investment (ROI) A $ 4,370,000 $ 611,800 $ 1,900,000 % % $ $ Company B 2,034,000 305,100 % 9.00 % C $ 3,070,000 7% 2.40 %
chpater 6 question 6 Assume a company with two divisions (A and B) prepared the following segmented income statement: A B Total Sales $ ? $ 200,000 $ ? Variable expenses 120,000 140,000 260,000 Contribution margin ? ? ? Traceable fixed expenses 100,000 ? ? Segment margin $ ? $ (20,000 ) ? Common fixed expenses 50,000 Net operating income $ 10,000 What is the company’s total sales? Multiple Choice $500,000 $600,000 $480,000 $460,000
Exercise 12-9 Return on Investment (ROI) and Residual Income Relations [LO12-1, LO12-2] A family friend has asked your help in analyzing the operations of three anonymous companies operating in the same service sector industry. Supply the missing data in the table below: (Loss amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to nearest whole number.) Company A B C Sales $310,000 $770,000 $670,000 N. Oper Inc. $45,000 Avg. Oper. Ass. $165,000 $141,000 ROI 18% 17% % Minimum required rate of return: Percentage 16% % 13% Dollar…
Exercise 7-7 (Algo) Segmented Income Statement [LO7-4] Shannon Company segments its income statement into its North and South Divisions. The company's overall sales, contribution margin ratio, and net operating income are $960,000, 34%, and $19,200, respectively. The North Division's contribution margin and contribution margin ratio are $121,600 and 38%, respectively. The South Division's segment margin is $140,800. The company has $211,200 of common fixed expenses that cannot be traced to either division. Required: Prepare an income statement for Shannon Company that uses the contribution format and is segmented by divisions. In addition, for the company as a whole and for each segment, show each item on the segmented income statements as a percent of sales. (Round your percentage answers to 1 decimal place (i.e .1234 should be entered as 12.3).) Total Company North Division South Division Amount % Amount % Amount %
Chapter 10 Homework 10 Sales Average operating assets Net operating income Minimum required rate of return Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division B $ 14,700,000 $ 7,350,000 $588,000 Division C $26,250,000 $ 5,250,000 $ 840,000 16% Req 1 Reg 2 Required: 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 15% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity Residual income (loss) Check my work mode: This shows what is correct or incorrect for the work you have co Complete this…
Exercise 11-1 (Algo) Compute the Return on Investment (ROI) [LO11-1] Alyeska Services Company, a division of a major oll company, provides various services to the operators of the North Slope oll field in Alaska. Data concerning the most recent year appear below: Sales Net operating income Average operating assets Required: 1. Compute the margin. Note: Round your answer to 2 decimal places. 2. Compute the turnover. $ 17,400,000 $ 4,700,000 $ 35,200,000 Note: Round your answer to 2 decimal places. 3. Compute the return on Investment (ROI). Note: Round your Intermediate calculations and final answer to 2 decimal places. 1. Margin 2. Turnover 3. ROI %
Exercise 10-9 Return on Investment (ROI) and Residual Income Relations [LO10-1, LO10-2] A family friend has asked your help in analyzing the operations of three anonymous companies operating in the same service sector industry. Supply the missing data in the table below: (Loss amounts should be indicated by a minus sign. Round your percentage answers to nearest whole percent and other amounts to whole dollars.) Company A C Sales 500,000 800,000 2$ 600,000 Net operating income 2$ 45,000 Average operating assets 2$ 162,000 145,000 Return on investment (ROI) 23 % 19 % % Minimum required rate of return: Percentage 13 % % 14 % Dollar amount $ 50,000 Residual income 7,000
Exercise 15-19 (Algo) Investment center analysis; ROI and residual income LO 15-9 The Northern Division of Allied Incorporated has operating income of $18,500 on sales revenue of $166,000. Divisional operating assets are $80,200, and management of Allied has determined that a minimum return of 13% should be expected from all investments. Required: a. Using the DuPont model, calculate the Northern Division's margin, turnover, and ROI. b. Calculate the Northern Division's residual income. Complete this question by entering your answers in the tabs below. Required A Required B Using the DuPont model, calculate the Northern Division's margin, turnover, and ROI. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Margin Turnover ROI Northern Division % turns %